Volatility Quality Indicator (VQI) is a technical indicator that was developed to identify quality stocks with low volatility. The indicator is based on the assumption that companies with low volatility are less risky and more stable Volatility Indicator.
The VQI measures volatility using two different parameters: standard deviation and beta. Standard deviation is used to measure the variability of a security’s returns, while beta measures the sensitivity of a security’s returns to the market.
Volatility Quality Indicator (VQI)
The VQI assigns a score between 0 and 100 to each stock. A score of 0 indicates high volatility, while a score of 100 indicates low volatility. The higher the score, the better the quality of the stock.
The VQI can be used to screen for low priced stocks Market Profile (the lower the volatility, the higher the stock price). It can also be used to screen for high quality stocks.
The default input parameters for calculating VQI are: 14 days of historical prices, monthly candles and 2-day standard deviation. These values were found to produce good results in most cases.
VQI Calculation Parameters for MT4
Replace “14” with “21” or “35”. Use longer time frames Currency Strength Meter if you trade weekly options or use shorter ones if trading daily options. The number of standard deviations is usually between 1 and 3 standard deviations away from the average true range (ATR) per day. If you would like to test your own settings enter -1 as beta value.
This is a screenshot of the VQI calculation in Amibroker:
The VQI can be calculated using an Excel spreadsheet or any other software that calculates MACD (Moving Average Convergence Divergence). The coefficients for each term were chosen based on optimization and backtesting. For the Binary Options Martingale Calculator best results, use the default parameters shown above.
The formula for calculating volatility quality indicator is:
VQI = 100 * ( ((V2 – V1) / (StdDevBandEnd – StdDevBandStart)) ^ 2 ) + β * ( SQRT(((HV14 – HV21) / ATR14)^2 + ((14 – V21) / ATR21)^2 )))
V1 = the lower band value on the Volatility Quality Indicator (VQI) chart
V2 = the upper band value on the VQI chart
StdDevBandEnd = the end of the period for which you want to calculate the standard deviation
StdDevBandStart = the beginning Indicator Strategy of the period for which you want to calculate the standard deviation
β = beta coefficient
ATR14 = 14-day ATR
HV14 = high-value for 14 days ago
ATR21 = 21-day ATR
HV21 = high-value for 21 days ago.
Download Volatility Quality Zero Line Indicator For MT4
For Excel users, the VQI can be calculated using the formula below. The beta coefficient is the average of -1 and 1 because it should be between 0 and 1 to conform with standard deviation calculations. If you set β = 0, the indicator will show an error message.
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